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Penalty for Google: What for the European Commission Imposed a Record Fine


Oleksandr Dementiev, lawyer at Ilyashev & Partners Law Firm

Source: European Pravda

Last week the European Commission decided to fine the world-renowned Google for EUR 4.34 billion. This is the largest antitrust fine ever imposed by the European antitrust authorities on one company.

The reason behind such decision lays in violation by Google of the EU antitrust law rules. As it became known from the decision of the European Commission, since 2011 Google has imposed illegal restrictions on

Android device manufacturers and mobile network operators to cement its dominant position in general internet search.

Before proceeding to reviewing the decision on its merits, it is necessary to analyze the Google’s strategy, which was further broken down to pieces by the relevant decision of the European Commission.

It is commonly known that most of Google’s revenue comes from its main product, the Google search engine. The company has understood early on that the transition from desktop PCs to mobile Internet, which began in the mid-2000s, would fundamentally change Google’s place in the search engines market. Therefore, a strategy was developed taking into account the results of such a transition to ensure that this search engine is used on mobile devices by as many clients as possible.

Adhering to the developed strategy, in 2005 Google acquired the original developer of the Android mobile operating system and has continued to develop this operating system ever since. Today, both in Europe and around the world about 80 percent of smartphones operate on the Android operating system controlled by Google.

Google holds dominant position in the national markets of general internet search engines throughout the European Economic Area, i.e. in more than thirty countries.

The entrance of other companies into such markets is limited by a number of obstacles. Android is a licensable mobile operating system for smartphones. That is, the third party manufacturers may get license and run Android on their devices.

Through its control over Android, Google dominates the global licensable mobile operating systems market (excluding China): its market share is over 95%. The network effect creates serious obstacles for anyone wishing to enter the market: the more users use a particular operating system, the more applications are created for it, which in turn attracts even more users.

According to the EU antitrust laws, the dominant position in the market is, as such, not illegal.

In any case, the leading companies have a special responsibility not to abuse their powerful market position both in the market where they hold such dominant position and in other markets.

Thus, in its Decision dated July 18 the European Commission determined that Google has engaged in three separate types of practices, which all had the aim of cementing Google’s dominant position in general internet search, in particular:
– illegal tying of Google Search and Google Chrome: Google has required manufacturers to pre-install the Google Search app and Chrome app as a condition for licensing Google’s app store, the Play Store;
– illegal payments conditional on exclusive pre-installation of Google Search: Google made payments to certain large manufacturers of smartphones and mobile network operators on condition that they pre-installed the Google Search app on their devices as a single app in this category;
– illegal obstruction of development and distribution of competing Android operating systems: Google has prevented manufacturers wishing to pre-install Google apps from selling smart mobile devices running on alternative versions of Android not approved by Google.

In doing so Google made impossible the sound competition with other search engines.

Google’s tying practices ensured the pre-installation of Google Search and Google Chrome on practically all Android devices and the exclusivity payments strongly reduced the incentive to pre-install competing search engines. Google also obstructed the development of Android forks, which could have provided a platform for rival search engines to gain traffic.

Google’s strategy has also prevented rival search engines from collecting more data from smart mobile devices, including search and mobile location data, which helped Google to enforce its dominant position as a search engine.

The European Commission’s fine of EUR 4.34 billion is a record one. It takes into account the duration and severity of the violation.

Pursuant to the EU’s 2006 List of Fines, the fine has been calculated on the basis of the value of Google’s revenue from search advertising services on Android devices in the EEA. The Commission decision requires Google to bring its illegal conduct to an end within 90 days of the decision.

At the very least Google has to stop and not engage in any of the three aforementioned types of practices. The decision also requires Google to refrain from any measures having the same or equivalent object or effect as these practices.

By following the Rules, the European Commission will closely monitor compliance of Google with the requirements, and Google is required to inform the European Commission of its obligations. In the event of non-compliance with the requirements of the European Commission, the company will be required to pay an additional fine of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company.

The Commission may have to determine such non-compliance in its separate decision, with any fines backdated to when such non-compliance started.

And finally, Google may also face civil actions for damages that may be brought before the courts of the Member States by any individual or business entity affected by its anti-competitive behaviour.
Being an innovator in the antitrust policy, by its decision on Google the European Commission will set the pace for paying more attention to the behaviour of online platforms by the antimonopoly departments, and, most likely, the Antimonopoly Committee of Ukraine will not remain aloof.

And the manufacturers of mobile devices and consumers will be given the right to choose any search engine as per their desires and needs.

© 2020 Ilyashev & Partners / Mobile version